Citigroup kicked off the first big week of earnings reports on a high note on Monday. The stock rallied 4 percent, pushing the rest of the financial sector higher along with it.
Goldman Sachs, J.P. Morgan, Wells Fargo and Bank of America report later this week. Here’s what experts are watching out for:
· “We’re not going to have the most beautiful bank numbers,” says CNBC’s Jim Cramer, “but people are expecting awful things from the banks, and when you get awful coming in … that’s exactly what you need going into earnings week.” After all, it’s a little easier to beat expectations when the expectations aren’t sky-high. As Cramer notes, “You need lots of people having given up on a group that, I think, is going to report not-that-bad numbers.”
· “I’ll say this about financials: It’s easy to attack them – they’ve underperformed the S&P 500 from last February to the lows by about 11.5 percent. But during this period where yields have been plummeting … the banks outperformed the S&P from mid-December to now,” notes Tim Seymour of Seymour Asset Management and CNBC’s “Fast Money.” But with a full slate of earnings reports approaching quickly, the question remains: Can that strong performance continue? Seymour says that if you look at the areas where the banks outperformed, “that tells you something about where they could outperform now.”
· Investitute.com co-founder and CNBC contributor Pete Najarian notes that, even though the big picture is similar to much of 2018 for the banks, the fact that they have been beaten up so badly gives them a head start in 2019. “I think [these stocks] have gotten so cheap … The story hasn’t changed dramatically. The only part of the story that has changed is: Where are they trading right now as versus to the book value? Because of that, I think it is attractive value.” Citigroup is trading at just under $60 compared to a tangible book value of $63.79. If positive reports keep rolling in, the big banks could look like a bargain at their current prices.
· Morgan Stanley senior analyst Betsy Graseck has a few names she’s watching. “We’re looking for institutions that we think can provide positive operating leverage. Bank of America has been showing that in spades, particularly in their consumer business. We think there’s more they can do there, and J.P. Morgan is on a roll for market share gain in a variety of different businesses…” Graseck also highlights Goldman Sachs as a name with a significant upside. “The bull case for Goldman is if we get through the one MDB with very little reserving over and above what we’ve got in our model, then yes, it’s very reasonable.”
